Making the Right Silver Coin Buying Choice!

The US government is now irrevocably on the path to deflation followed by inflation and eventually hyperinflation. In all cases in the last few hundred years, countries facing hyperinflation have fallen back on gold and silver coins as islands of stability in a chaotic sea of worthless paper fiat money. However, with a confusing variety of silver coins and rounds available and limited funds with which to purchase them, we need to look at the core determining factor in the American people. The Idiot Factor.

The average American is just not the brightest bulb in the world's lamps. Their limited intellects can grasp new knowledge only very slowly. Ask any marketing guy why commercials aren't more sophisticated and he'll tell you the same thing P.T. Barnum famously uttered, "No one ever lost money in the US by underestimating American intelligence".

With all this in mind, let's envision the aftermath of a US Dollar collapse. History tells us that Argentina, Yugoslavia, Weimar Germany, Iceland and many other countries quickly began to use old silver and gold coins very quickly. Immediately below please find my version of an effective sign advertising a merchants acceptance of US 90% silver coins:

US Silver Coins Accepted at this Store!

All US dimes, quarters, halves, and silver dollars dated 1964 & prior

and

US Mint Silver Eagles all years gladly accepted

Pretty easy to understand sign, wouldn't you agree? Unfortunately, other silver and gold being collected right now will only serve to confuse trading partners and possibly lead to violent misunderstandings. Let's check out my somewhat tongue-in-cheek sign below as a comparison:

Silver Coins Accepted at this store!

 

All US dimes, quarters, halves, silver dollars dated 1964 & prior

and

US Mint Silver Eagles all years gladly accepted

and and

Kennedy halves dated1965-1970 (but nothing after) unless your talking about some proof coins issued that do have some silver - but not all do.

and and and

War Nickels dated 1942-1945. But the 1942 ones have to have a large mint mark on the reverse above Monticello or forget it!

and and and and

Some older Canadian coins have silver, but we don't have a clue which ones - so who knows?

and and and and and

There are these things called silver rounds. They're minted by a large number of private companies and there are hundreds of versions with a wide variety of images on the obverse/reverse. I even saw ones once with Santa Claus and the Easter Bunny on them! The guys from Pawn Stars have one for sale with the Old Man's picture on it. They all usually claim to have one pure ounce of silver, but what if they're lying? So your guess is as good as ours as to what they're worth...if anything!

and and and and and and

There are Chinese Panda silver coins too! They are minted by China and are very pretty. Unfortunately, numerous Chinese counterfeiters have made excellent copies that only an expert can readily identify...so don't bring them here! Oh, and don't get me started on Mexican coinage! How are my employees supposed to read Spanish writing when they have a hard enough time understanding English! Please, it makes my poor gringo head spin!

Now tell me honestly. Which sign do you believe will be more effective? Your answer should dictate your silver buying choices.

Rick



Silver Halves I Have Loved!

Shall I compare thee to a summer's day?
Thou art more lovely...

William Shakespeare

I am not a poet by nature. I'm infintely more practical and inclined towards unemotional analysis than the scribbling of romantic couplings.  When birthdays and anniversaries roll around, you'll inevitably find me in the drugstore isle reading through the Hallmark cards for a suitably saccharin-sweet missive. However, please don't dismiss me out of hand as just another emotionally distant male automoton. I can indeed be persuaded to gush like a ruptured dam on certain select topics - 90% silver halves being one such example.

Yes, my shameful secret is finally out in the open for everyone including my poor suffering wife to view. Julia Roberts' chick flicks may leave me cold and bored, but a roll of 90% silver 1964 dated kennedy halves can make me swoon like a school girl. A TV news story about long lost lovers finally reunited will draw no sighs from my lips, but a handful of Franklin halves will cause my pulse to quicken and my face to blush worse than a shy boy receiving his first smooch from the girl next door.

Like many such examples, I believe my abnormal psyche formed during my pre-teen childhood years in the  late 60's. I would gather my hoard of 90% and 40% silver Kennedy halves with my Franklins and stack them compulsively in my bedroom all alone. The coins shone with an unearthly gleam, reflecting the suns rays during the day and the moon rays by night. I would always keep my silver coins separate from the nickel/copper dimes and quarters, though I was never sure at that time the precise motives for the segregation. I guess I just thought it would be a heinous crime to mix my dignified lady silver coins with the gutter snipe, cheaply painted, streetwalker-like nickel/copper abominations.    

Today as an adult I undertand the history of gold and silver as cornerstones of human commerce over the last 6000 years. I'm likewise much too informed about the runaway debt, inflation, and certain economic ruination coming our way due to the proliferation of fiat money in the US and around the globe. However, none of that knowledge is really necessary to comprehend the reason for my love note to my silvery paramours. As a matter of fact, all that is truly required to remove the government blinders from your eyes is to hold a 90% silver half in your hand. Feel the firm, stolid weight of the beautiful coin. Anyone following my instructions will understand my sentiment when I say this is the coin you'd be proud to take home to meet your parents. This is the lifemate that you'd be honored to call wife or husband.

Next, lay your hands on the new copper/nickel slugs that pass for dimes, quarters, or even halves today. Notice the world of difference? Of course you do! The coins of today are lies. They're nothing more than two bit working girls or unfaithful girlfriends from the wrong side of the tracks. Just turn your back on them for a minute, and you'll find them cheapening themselves with the first inflation and hyperinflation boy-toy that pops up. Even their silvery coating looks false and overdone - like a 45 year old cougar wearing pancake makeup in hopes of tempting some drunk sailor into a back alley for a quick, sordid tryst.

One day everyone in the world will have the blinders removed from their eyes and discover that their honorable wives and daughters (90% silver coins) have been replaced by low imitations that have stolen their wealth and left them bereft and penniless for some South American pool boy.

Rick Pyle

CLICK ADS BELOW FOR FREE DISCOUNT!

How Reliable is the Old Gold / Silver Ratio?

Many traders, speculators, and investors focus on the gold/silver price ratio in determining which metal is under or overvalued. In recent weeks and months the ratio has collapsed from above 65:1, down to a current low of around 36:1. Throughout the twentieth century, the gold/silver price ratio went to nearly 100:1, occasionally dipped below 30:1, and only briefly hit a ratio of 17:1 in 1980. But few seem to question how misleading this ratio may be, let alone question why the ratio matters for a monetary system that (for the time being at least) is no longer based on gold and silver.

Gold/Silver Ratio as a Relic from Bygone (for now) Monetary System

First off, a quick review of where the interest in the gold/silver ratio comes from. When governments and their people used gold and silver as a medium of exchange, the official mint would dictate at what ratio they would coin gold and silver. In the case of the “American Act for Establishing a Mint” in 1792, all private persons had the right to have bullion coined at “the legal ratios.” The ratio was set by the U.S. government under the direction of the Secretary of Treasury Alexander Hamilton at 15 ounces of silver for every one ounce of gold, often expressed as a gold/silver ratio of 15:1. This relative value had been present in Europe more or less since the late 1500s, when large amounts of silver had flooded into Europe from the huge discoveries made by Spain in Mexico and Peru (which are still the two largest sources of silver today.) This ratio was supposed to be a reflection of the commercial value of gold and silver on the market in Europe—or the proportional value of the two metals in western trade. The European gold/silver ratio of 15:1 was much higher in gold’s favor than in India, parts of Africa, or East Asia, where gold/silver ratios were reported (in isolated cases) as low as 1:1, and generally stayed well below 10:1. Of course, the fixed Anglo-European ratio got out of whack with the market ratio, which is part of the problem with fixed bimetallic systems, but that is another story.

Gold/Silver Price Ratio Is Distorted by Government Bias against Silver

Over the course of the nineteenth century, for various reasons, gold was increasingly favored first by European nations, then by the United States, supposedly as a more stable monetary asset due to its rarity. The prejudice in favor of gold and against silver was due to many reasons, but the bottom line is that silver began to be demonetized in the late 19th century. This demonetization only accelerated throughout the twentieth century as countries from China to the U.S banished their silver from currency circulation. It also did not help matters that huge new discoveries of silver in places like the American West dumped ever more silver on the market. Yet without governments getting rid of silver stockpiles, or refusing to coin new silver bullion at the mint, the monetary demand for silver would not have dropped to as great a degree as it did. Governments took part in a campaign to demolish the monetary value of silver, really, and this cultural legacy has left its scars on the importance of silver as an investment. By the early twentieth century, the value of silver was nearing 100 ounces to 1 ounce of gold, the lowest in history. Yet, the mine production of silver was not 100 times that of gold, nor was the relative abundance of silver money 100 times that of gold.

You should note, then, that the prejudice of the official sector (governments and mints) in the US and Europe has played a factor in the widening of the gold/silver ratio away from 15 to 1, to anywhere from 35: 1 up to 100:1. The dumping of silver on the market by government continued right up until a few years ago. Between 1965 and 2000 governments sold over 3 billion ounces of silver, versus roughly 150 million ounces of gold over the same time period. Moreover, another billion or so ounces of silver was consumed by industry, as opposed to private gold stockpiles actually increasing. The official sector, beginning in late 2009, has begun to buy back some of this gold. They have not begun to do the same with silver. Should we be wondering when they might start?

Keeping with the issue of official sales, governments at present only hold at most 60 million ounces of silver, as compared with 1 billion ounces of gold. Among those who run our world, silver is now far rarer than gold.

With Silver, the Ants (Investors) Will Carry Away the Banks’ Picnic Basket

Given that the official sector can’t dump any more silver on the market, this dramatically increases the importance of the individual investor in the silver market. It means that the vast majority of silver bullion in the world is held by investors. This is quite different from the last silver bull market, where official exchanges and governments stood ready to release several hundred million ounces for consumption.

But just because average investors are the ones who hold most of the silver in the world, please do not take this to mean that there is widespread ownership of silver among retail investors! In fact, up until recently, most people who bought precious metals only bought gold. During the decade from 2000 to 2010, the dollar amounts invested in gold far outstripped those invested in silver. Yet in the past few months something has begun to change.

So far in 2011, dollar demand for Silver Eagles has been nearly equal to that of gold. Inflows into the iShares Silver Trust (SLV) have been greater than inflows into the GLD ETF, and Eric Sprott, of Sprott Asset management has similarly reported that investors are buying more silver from him in dollar terms than gold. Additionally, James Turk of GoldMoney is reporting silver sales near gold in dollar terms. These statements, like them or not, mean that in terms of investor interest the gold to silver ratio is 1 to 1. Since there is less silver above ground than gold, it really means that the gold to silver price ratio should be in silver’s favor.

Please Pay Attention to Gold/Silver Ratios in Terms Other Than Price

I understand if you think that this is a bunch of hyped BS from someone getting carried away with an asset that is dramatically outperforming nearly everything else in the investment universe at the moment. But remember, investment manias take on a life of their own, and when the human investing herd changes directions, you need to learn to get out of the way. I write this with old silver and goldbugs in mind, who perhaps understandably can’t believe the price action on an asset many have owned since it was under 4 dollars. I will address the various metrics for valuing silver today in a different article, but rest assured, with the amount of money printing or monetizing going on, silver may be as cheap today as it was when its price was 10 dollars. Hard to believe, but I think its true.

And at some point, more articles online may begin to quote other ratios between the precious metals. For example, about nine times as much silver as gold comes out of the ground each year, but the vast majority of this silver is used by industry, much of it destroyed. And miners, believe it or not, only believe that there is about 6 times as much silver in the ground that can be mined, according to the USGS. I have read or heard others claim that there is 15 or 20 times more silver in the Earth, but much of this may never, under any circumstance, be economical to mine (this ratio, in other words, is the natural occurrence ratio, not the reserve base ratio). In addition, you might think that producers will just be able to ramp up production in silver to increase the amount of silver bullion or coins to a level greater than gold. But this has not happened yet: the amount of new gold and silver bullion and coin production is not that far from 1:1, even if more silver is produced. And over the past decade, 35-40 times more silver was not earmarked for coins and bullion, which is what the price ratio of gold to silver would lead you to believe.

In short, if you are going to use gold/silver ratios, you may want to think about the possible relevance of other ratios:

9:1 is the ratio of silver to gold annual mine production 6:1 is the estimated ratio of economic gold to silver in the ground (USGS) 5:1 is the estimated physical ratio of all silverware, silver/gold jewelry and other stocks above ground (according to CPM Group) 1:1 is the year-to-date ratio of investment dollar demand. 1:3 (more silver than gold) is the physical ratio of gold and silver coins/bullion These gold/silver ratios are not as familiar to traders, hedge fund managers, or the investing public. But I think that someday in the not so distant future they will be.

Time is running out fast! Hyperinflation seems unavoidable as fiat paper money is being printed as fast as the US presses can run. To protect your wealth and your family, buy gold and silver now from these top companies, APMEX Gold and Silver and Silver American Eagles.

Rick
CLICK ADS BELOW FOR FREE DISCOUNT!

Silver - What Better Investment?

When thinking about an investment, the best managers look for returns that beat what they perceive to be average. In the long run, wealth is a relative measure—today, even the poorest people are wealthier than the richest people five hundred years ago, though we’d still say that today’s poor are poor.

Investments work along the same lines, with the simple concept being that an investment must have performance that is preferable to your current financial trajectory, and it must have a return that beats holding money in cash, as well as the negative returns incited by inflation.

Whether or not you are a current silver holder or not, ask yourself one simple question: what price would it take for you to sell your metals or buy government debt? At what rate would it be favorable for you to invest your money in stocks, bonds or any other investment?

Now, take that number, which is likely quite high, and compare it to past performance of all the markets out there. You can compare it to stocks, bonds, and commodities, and see simply which asset type has produced returns that you would see favorable. It would be a safe bet to see that the returns and performance that you want out of your investment portfolio haven’t been found in stocks nor bonds for the past twenty years.

Silver Bubble is Not

For the individual investor, an exercise that looks into what he or she wants in an investment isn’t a daily happening, though it is for the institutional investor. The markets measure just like wealth—you can do well, as long as the other guy doesn’t do as well as you do.

So when the hysteria of a bubble emerges, investors should ask bubble promoters where they should go from silver. Should they buy stocks, which are priced as many as twenty years into the future? Should silver investors pile into fixed-income investments and take home 4-5 percent per year?

It is here that we reach the end of such an argument. Not only are the opportunities present in stocks and bonds weak, but they’re also offering returns that aren’t consistent with their risk profiles. So why would you hold silver, if you wouldn’t own cash flowing stocks, bonds, or an assortment of mutual funds? Because silver is the new cash.

Investors who have amassed massive positions in the metals markets are telling the market that the options aren’t exciting. If you’ve only a small selection of underperforming bonds, underperforming and expensive stocks, or negative-return generating cash, is it really much surprise that you want an alternative? Traditional investments have a best possible outcome of returns equal to a few percent per year, after inflation, and cash has a best possible outcome of negative returns each year.

The bubble isn’t in silver ownership, but in low rates and indebted economic institutions. When investors hold commodities, they’re holding the new cash, and they are insulated from risk to a degree that everyone should appreciate. Silver is “in a bubble” because the remaining opportunities are stuck in a rut. At what point would silver investors swap their holdings for paper assets? You might have to bring back Volcker to make that happen.

Time is running out fast! Hyperinflation seems unavoidable as fiat paper money is being printed as fast as the US presses can run. To protect your wealth and your family, buy gold and silver now from these top companies, APMEX Gold and Silver and Silver American Eagles.

Rick
CLICK ADS BELOW FOR FREE DISCOUNT!

Prices Haven't Risen for Over 70 years!

When you're riding in a car the houses and trees outside the vehicle appear to be whizzing past rapidly while you stand still. Of course, every adult knows that the apparent movement of the objects outside the car is only an optical illusion. The motor vehicle in which you're riding is moving. The scenery is actually rooted fast.

The driving analogy above is ideal for describing the inflation of prices in US fiat money (US Dollars). It is not the prices of food, fuel, etc., that are continually moving upwards, it's the value of the US paper Dollar that is plummeting downwards!

To prove my price inflation assertion, let's look at everyday prices on items from 1940 and 2010. All costs will be computed using US 90% silver coins (dimes, quarters, halves) that were minted for circulation up to and including 1964. Coins minted after that date for circulation were made from base metals and fall under the heading of fiat money (money that has no value outside of the government mandated value).

Average Cost Gallon Of Gas

1940 $0.11 cents

2010 $2.75

Present Value $0.11 cents silver money $2.97

Average Cost Loaf of Bread Food

1940 $0.10 cents

2010 $2.79

Present Value $0.10 cents silver money $2.70

Average Cost 1lb Hamburger Meat

1940 $0.20 cents

2010 $3.99

Present Value $0.20 cents silver money $5.40

You can see from the price information above that if you'd saved your 90% US silver coinage since 1940, you could still buy these everday items for the same amount based on their silver content value! In other words, the "real prices" of these items has really stayed relatively the same. The only reason that inflation has appeared to cause prices to rise is that the actual buying power of the US Federal Reserve Notes un-backed by precious metals has dropped precipitously.

There are exceptions, of course, to the above rule. Although housing prices have been battered by the recession, they're still hovering above their 1940 silver coin equivalent. The price of a new car is likewise further ahead than its equivalent in 1940 silver coins. However, I expect these exceptions to be liquidated in the future as silver continues to rise versus the empty shell that is the US Dollar of today.

So, the next time you fill up with gas, don't give the gas station attendant a hard time. Remember, it's the Federal government with its money printing presses flooding our economy with worthless greenbacks that you should direct your anger towards.

Time is running out fast! Hyperinflation seems unavoidable as fiat paper money is being printed as fast as the US presses can run. To protect your wealth and your family, buy gold and silver now from these top companies, APMEX Gold and Silver and Silver American Eagles.

Rick

CLICK ADS BELOW FOR FREE DISCOUNT!

Should You Hoard Nickels?

As precious metals like silver, gold, and platinum continue to increase in price as the US Fiat Money Paper Dollar is overprinted into financial oblivion, base metals are attracting some side glances as well. In particular copper pre-1982 pennies and nickel coins (75% copper & 25% nickel). Indeed, due to the rise in the commodity price of both copper and nickel, coinflation.com lists the metallic value of the current US nickel at close to $0.07 cents! If it wasn't for a pesky law passed in December of 2006 forbidding the exportation and / or melting of US nickels, enterprising speculators might be lighting up the cauldrons already for profit!

However, given the assumption that most US citizens who've chosen to start hoarding nickels are lawful people, what could possibly be their motive for stacking the 5-cent pieces in their garages, sheds, basements etc? Well, it can't be for ease of storage and portability (always great in survival situations). For example: $20,000 worth of gold coins could be easily carried by your 85 year old grandmother in her purse. $20,000 worth of American Silver Eagles weighs 40 pounds, and can be carried by an average man some distance. However, $20,000 worth of nickels (face value) weigh 4,410 pounds, and isn't going anywhere without a forklift and a light truck or heavy duty pickup! As far as ease of storage gold and silver win hands down as well. My wife hardly even notices my hiding spots for my gold and silver coins. On the other hand, how is any married man (who presumably wishes to stay that way) going to schmooze his significant other into letting him store a mere 400,000 nickels or $20,000 worth around the house! I suppose you could form the nickel bricks into coffee tables and other furniture, but I just can't see my wife sitting down quietly while a truck is backing up to the house to unload the massive cargo.

I don't want people to get me wrong. I am very sympathetic to any person whose goal is to diversify out of the US(less) Dollar into more valuable commodities. I imagine the typical nickel hoarder may have missed the gold and /or silver trains, and is hoping to catch the more modest nickel and copper rockets before takeoff. However, I just see the logistics mentioned above to be major stumbling blocks to realizing an eventual profit from hoarding nickels, to say nothing of the thorn in the nickel-guys paw that is the US Law also detailed above.

Finally, I'd like to offer my advice. Forgo the nickels with the numerous logistical and legal roadblocks, and buy American Silver Eagles and Junk Silver (pre-1965 dimes, quarters, halves) on every dip in silver prices. Silver is headed to $50 and beyond. You may have missed the first quarter of the game, but there is still another three to go with a nice half-time show in the middle (NO CHRISTINA AGUILERA I PROMISE - I LOVE AMERICA TOO MUCH)!

Time is running out fast! Hyperinflation seems unavoidable as fiat paper money is being printed as fast as the US presses can run. To protect your wealth and your family, buy gold and silver now from these top companies (below):

Rick

CLICK ADS BELOW FOR FREE DISCOUNT!